S 204 Session 111 (1995-1996)
S 0204 General Bill, By Wilson and M.T. Rose
A Bill to amend Title 34, Code of Laws of South Carolina, relating to banking,
financial institutions, and money, by adding Chapter 35, the First Purchase
Family Housing Act, so as to authorize the establishment of individual housing
accounts; to empower financial institutions to handle the accounts and to
provide that contributions to the accounts when used solely in connection with
the purchase of a first principal residence are tax deductible.
10/17/94 Senate Prefiled
10/17/94 Senate Referred to Committee on Banking and Insurance
01/10/95 Senate Introduced and read first time SJ-71
01/10/95 Senate Referred to Committee on Banking and Insurance SJ-71
A BILL
TO AMEND TITLE 34, CODE OF LAWS OF SOUTH
CAROLINA, RELATING TO BANKING, FINANCIAL
INSTITUTIONS, AND MONEY, BY ADDING CHAPTER 35,
THE FIRST PURCHASE FAMILY HOUSING ACT, SO AS TO
AUTHORIZE THE ESTABLISHMENT OF INDIVIDUAL
HOUSING ACCOUNTS; TO EMPOWER FINANCIAL
INSTITUTIONS TO HANDLE THE ACCOUNTS AND TO
PROVIDE THAT CONTRIBUTIONS TO THE ACCOUNTS
WHEN USED SOLELY IN CONNECTION WITH THE
PURCHASE OF A FIRST PRINCIPAL RESIDENCE ARE TAX
DEDUCTIBLE.
Be it enacted by the General Assembly of the State of South
Carolina:
SECTION 1. Title 34 of the 1976 Code is amended by adding:
"CHAPTER 35
First Purchase Family Housing Act
Section 34-35-10. This chapter may be cited as the First
Purchase Family Housing Act.
Section 34-35-20. (A) An individual is allowed as a deduction
from South Carolina taxable income as defined in Chapter 7 of
Title 12 annually an amount, not to exceed five thousand dollars,
deposited into a first time house purchase account established for
his benefit to provide funding for the purchase of his first principal
residence together with all interest paid or accrued within the
taxable year on the account. A married couple may deduct up to
ten thousand dollars. No deduction may be taken for an amount on
deposit in the account for less than six months before withdrawal.
An amount deposited less than six months before the close of the
taxable year may be taken as a deduction only for the next
succeeding taxable year.
(B) For purposes of this chapter, the term `individual house
purchase account' means a trust created or organized for the
exclusive benefit of an individual or, in the case of a married
individual, for the exclusive benefit of the individual and his spouse
jointly but only if the written governing instrument creating the
trust meets the following requirements:
(1) Contributions may not be accepted for the taxable year in
excess of five thousand dollars for a trust established for an
individual or ten thousand dollars for a trust established for a
married couple.
(2) The trustee is a bank or building and loan association, as
defined in Section 34-1-10, or a credit union chartered or
supervised under federal law or the laws of this State whose
accounts are insured by the Federal Deposit Insurance Corporation,
the Federal Savings and Loan Insurance Corporation, the National
Credit Union Administration, or any agency of this State or any
federal agency established for the purpose of insuring accounts in
these financial institutions. The financial institution must actively
make residential real estate mortgage loans in this State.
(3) The assets of the trust may be invested only in savings or
time deposits in amounts fully insured as prescribed in item (2) of
this subsection. Funds held in the trust may be commingled for
purposes of investment, but individual records must be maintained
by the trustee for each individual house purchase account holder
which show all transactions in detail.
(4) The entire interest of an individual or married couple for
whose benefit the trust is maintained must be distributed to him, or
them, not later than one hundred twenty months after the date on
which the first contribution is made to the trust.
(5) Except as provided in item (2) of this subsection or
subsection (D) in the case of a disability or death, the trustee shall
distribute no part of the funds in the account unless it:
(a) certifies that the money is to be used for the purchase
of a residence located in this State and it provides that the
instrument of payment is payable to the mortgagor, construction
contractor, or other vendor of the property purchased;
(b) notifies the Department of Revenue and Taxation on
forms prescribed by the department of the amount withdrawn within
ten days after the date of withdrawal.
(C)(1) Except as otherwise provided in this subsection, an
amount paid or distributed out of an individual house purchase
account must be included in gross income by the payee or
distributee for the taxable year in which the payment or distribution
is received unless the amount is used exclusively in connection with
the first purchase of a principal residence in this State for the payee
or distributee.
(2) Item (1) of this subsection does not apply to the
distribution of a contribution paid during a taxable year to an
individual house purchase account to the extent that the contribution
exceeds the amount allowable as a deduction under this chapter if:
(a) The distribution is received on or before the day
prescribed by law including extensions of time for filing the
individual's income tax return for the taxable year.
(b) No deduction is allowed under this chapter with respect
to the excess contribution.
(c) The distribution is accompanied by the amount of net
income attributable to the excess contribution. This net income
must be included in the South Carolina taxable income of the
individual for the taxable year in which it is received.
(3) Item (1) of this subsection does not apply to the
distribution of a contribution paid during a taxable year to an
individual house purchase account to the extent that the contribution
exceeds the amount allowable as a deduction under this chapter and
no deduction was allowed under this chapter with respect to the
excess contribution.
(4) The transfer of an individual's interest in an individual
house purchase account to his former spouse under a dissolution of
marriage decree or under a written instrument incident to a
dissolution of marriage is not considered a taxable transfer made by
the individual and the interest, at the time of the transfer, is treated
as an individual house purchase account of the transferee and not of
the transferor. After the transfer, the account is treated, for
purposes of this chapter, as maintained for the benefit of the spouse.
(D) If a distribution from an individual house purchase account
to an individual for whose benefit the account was established is
made and not used in connection with the first purchase of a
principal residence in this State for the individual, the tax liability
of the individual for the taxable year in which the distribution is
received must be increased by an amount equal to ten percent of the
amount of the distribution which is includable in his South Carolina
taxable income for the taxable year. If during a taxable year the
individual uses the account or a portion of the account as security
for a loan, the portion used is treated as distributed to that
individual. The liability may not be imposed if the payment or
distribution is attributable to the taxpayer dying or becoming
disabled. An individual is not considered disabled unless he
furnishes proof of the disability in the form and manner the
department requires. Upon the death of an individual for whose
benefit the account had been established, the funds in the account
are payable to the estate of the individual. If the account was held
jointly by the decedent and a spouse of the decedent, the account
must remain as the individual house purchase account of the
surviving spouse.
(E) The trustee of an individual house purchase account shall
make reports regarding the account to the department and to the
individual for whom the account is maintained with respect to
contributions, distributions, and other matters the department
requires. The reports required by this subsection must be filed at
the time and in the manner as the department requires. A person
who fails to file a required report is subject to a penalty of ten
dollars for each instance of failure to file.
(F) In the case of an individual house purchase account, the
term `excess contributions' means the amount by which the amount
contributed for the taxable year to the account exceeds the amount
allowable as a contribution under item (1) of subsection (B) for the
taxable year. A contribution which is distributed out of the
individual house purchase account and a distribution to which item
(2) of subsection (C) applies must be treated as an amount not
contributed.
There is imposed for each taxable year a tax not to exceed six
percent of the value of the amount of the excess contributions to an
individual's individual house purchase account."
SECTION 2. The provisions of Chapter 35 of Title 34 of the
1976 Code apply to individual house purchase accounts established
in taxable years beginning after 1995.
SECTION 3. This act takes effect upon approval by the
Governor.
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